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Trends

EU oil embargo on Syria (Brent: $112.7)

Tight supply situation on light products

Two and a half months after agreeing on putting an embargo on Syria oil exports, the EU has effectuated the deal. With an export of roughly 500,000 bpd Syria is not a major exporter, but considering the current supply situation, it will surely have an impact on prices. The inventory situation across the globe is very tight, especially on the lighter products. In Europe, inventories are at an 8-year low, and all extra output from the Middle East seems to be going to Asia. Combined with lower US output of shall oil due to winter, it looks like the tight situation on lighter products will not be solved this year.

Brent expires - second contract likely to catch up

Please be aware that the December Brent contract expires later today. Recently we have seen a move up in the second contract to close the gap, rather than the first contract dropping to converge towards the "new" first contract.

Recommendation

We recommend clients to adjust risk tactics for a potential move higher. We recommend consumers who have not hedged yet to consider partly hedging at 108 and 112.50. As OPEC will likely support prices around and above 100 (already Iran has proposed cuts in output), we recommend buying on market dips.